Martin Lewis issues warning to people thinking of cancelling energy bill direct debits

Money saving expert Martin Lewis has warned people not to cancel their direct debit for energy bills.

One viewer, Joanne, wondered if 'there is any mileage in cancelling direct debit payments when the bill comes in. So, it's not giving energy companies money regularly and upfront.'

To which Martin replied: "Now you will note earlier I said that the price cap for somebody on typical use on direct debit is £3,549 a year, but those who pay and receipt of bills is £3,764 a year. So, two hundred pounds a year more, and that's the big problem you pay more per unit rate of gas and electricity if you pay in receipt of bills."

He went on to explain why you shouldn't rush to make the switch from direct debit to paying when you receive a bill.

"However, the direct debit is based on the energy firm's estimate of what you'll use now. If it's estimating too high [and] you don't like it you will get a short-term cash flow gain from switching to paying in receipt of bills - that's just when they send you a bill, and you pay for it each time so you might pay less money in the short run from it.

"However, over the longer run, because you're paying more for each unit of energy you use you will pay more in receipt of bills because if you overpay on direct debit you are entitled to that money back, in the long run, I hope that one makes sense."

So, essentially, while direct debit might look more expensive on paper in the long run you're getting more for your money than if you paid each time you got a bill.